URA has secured a significant victory in its fight against tax evasion, with the high court ruling in its favour in a landmark case against Crane Autos Ltd. The case exposed complex tax evasion schemes and mechanisms employed by non-compliant taxpayers.
The ruling delivered by Hon Justice Stephen Mubiru on July 16th, 2024 has far reaching implications in the fight against tax evasion, base erosion and profit shifting.
The court found that Crane Autos Ltd. and its affiliates were involved in unlawful tax avoidance, using schemes such as transfer pricing and manipulation of tax havens to shift profits and conceal taxable income.
The case involved a tax evasion scheme where Crane Autos Ltd established a branch in Dubai and continued operations through the branch between 2002 and 2020, purchasing Ural armoured trucks from M/s Ural Automobile Works JSC and selling them at a mark-up to its sole customer, East African Motor Supplies Ltd, which was under the same management and ownership.
The Court also found that the Dubai branch had no role to play in the transaction cycle except to facilitate aggressive transfer pricing and shift profits to an offshore entity in a tax haven. The Judge concluded that there were exceptional public interest grounds to justify deferring dissolution of Crane Autos Ltd, as there was obvious public interest in undoing a reasonably suspected unlawful tax avoidance scheme.
The company had self-declared taxes amounting to UGX 603,852,927, but URA’s investigations revealed additional liabilities of UGX 20,129,287,806 bringing the total tax evaded to UGX 20,733,140,733.
The ruling highlights the importance of vigilance against tax evasion schemes to avoid revenue leakages. The court’s decision to defer the company’s dissolution has saved Uganda from losing UGX 20.1 billion in tax revenue.
URA awaits the outcome of a related case seeking to lift the corporate veils of Crane Autos Ltd. and its affiliates making the assets of the directors and affiliate companies a fair game in URA’s efforts to collect the outstanding tax.
This landmark case demonstrates URA’s commitment to combating tax evasion and promoting Uganda’s economic independence.
Correspondence by Barbra Ajambo
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